The government’s participation in recapitalization of the national banking system 19

The real sector: factors and trends 24

IET Monthly Trend Survey: April 2000 25

Oil and gas sector 27

Concepts of the Russia's agrarian policy: two approaches 28

Foreign trade 30

Economy and politics in April 2000

The emergence of the economic situation in the country in April has matched optimistic projections. The economic growth continued, inflation rate was below the projections set in the budget, the plan on tax revenues to both the federal and regional budgets was fulfilled and even overfulfilled (while, according to Goskomstat, 89% of such payments was made in ‘live» money), foreign reserves were growing, and, with no external financing, the country followed the schedule of payments for credits from the international financial institutions from the RF MinFin’s resources.

The completion of the presidential election rally decreased political risks. Though there was some element of uncertainty determined by the absence of an official information of a new government (both the composition of the Cabinet and possible changes in the structure of management) and its economic program, one should not exaggerate the impact of the factor on the domestic economic life and foreign investors’ attitude. That is proved, in particular, by both a relative stability of the domestic financial markets during the April panic at the world exchanges1 and the statements of international agencies regarding a possibility of raising Russia’s investment rating.

The newly elected President and his team are challenged by an unprecedented field of opportunity to an actual reforming of the economic environment in the interests of a stable economic development. The favorable attitude of the Lower House of has manifested itself in the adoption of the laws that for many years had been doomed for failure in the previous two Dumas. Genuinely more shrewder than the Duma, the Upper House demonstrated its readiness for cooperation, which was strengthened by the Federation Council’s eagerness to solve the problem of extension the governors’ tenure, creates a possibility of a more detailed consideration of problems of local self- governance and budget federalism. Having resisted the lobbyists’ pressure and populism during the election rally, the executive power still keep its stand of Supreme Arbiter in the conflicts of groups of interests (the conflict between the two RAO=s) and to maintain its credit of confidence among the population (despite an open dissatisfaction of the government of the position taken by the State Duma regarding raising the minimal wage rate, even under the condition that this index would not be used any more as the basic one to identify the value of social payments).

The whole range of signals allow assumption that the executive power realizes the unique nature of its position and wishes to seize the opportunity: the proposals on changing Tax Code and Budget Code (which has been enacted just recently and are in principle important from the viewpoint of establishment of the institutional base for economic development, albeit bearing the imprint of political compromise), re-activation of the work on the Land Code, the concept of funding the social sector, etc., — all these processes witnesses that the new power think of the country’s prospects. The liberal ideas are subject to an increasingly consistent development. The Government initiated the cease of Duma’s consideration of a bill that provided the strengthening of the administrative control for banking activities under the banner of struggle against capital flee.

The contacts held between the government and economic community and representatives of the IMF and the World Bank testify to a serious interest of the latter in the reformatory intentions of the new power. Furthermore, statements on a possible amending the IMF- Russia cooperation program due to be considered in the course of a new round of talks in summer 2000 allow the assumption that the outcome of such contacts bring about a certain optimism to foreign investors.

At the same time, one should note certain negative factors whose emergence is pregnant with the darkening of the prospects for sustained growth- namely, the possible complications with regard to the budget situation. The military actions in Chechnya are still funded, though there is no such item in the 2000 budget law. The announcement of the future revision of the cooperation program with the IMF automatically implies the continuous payments for the international financial institutions’ credits from the budgetary funds. The refusal to revise export duties and to raise the minimal wage rate allows the assumption that the government is aware of such perils.